Funding for Lending boosts mortgage choice in the UK to record levels

The choice of mortgages for home buyers in the UK reached record levels last month with more products on offer than at any time since the housing market crash.

The number of mortgage products available last month exceeded 10,000 for the first time in almost five years, according to the National Mortgage Index from the Mortgage Advice Bureau, and independent mortgage broker.

July’s average of 10,262 meant that consumers’ product choice has improved 33% in the last year, 97% in the last three years and 198% since July 2009.

Using data from more than 500 brokers and 800 estate agents, the National Mortgage Index also shows that the average purchase mortgage rose for a fifth successive month.

The typical home buyer borrowed £159,391 in July, up by 6% since the start of the year. In comparison the typical homebuyer salary has grown at just half this rate since January, with a 3% increase bringing July’s average to £40,792.

This has meant the average loan to income ratio has crept up slightly, but is little changed from July 2012. It suggests that brokers and lenders are keeping the emphasis on affordability and responsible borrowing despite growing consumer appetite for buying residential property.

The MAB said that having completed its first year of operation, the Funding for Lending Scheme (FLS) has now brought average fixed rates down by at least 1% across two, three and five year products. The biggest drop has been in the average two year fixed rate, with five year rates falling marginally further than three year rates.

As a result July 2013 saw 92% of home buyers applying for fixed rate deals over variable rate deals compared with 79% in July 2012, while 91% of home owners made the same choice when applying to remortgage their property compared with 77% in July 2012.
The average borrowing for remortgage deals has increased by 7% in the last year from £150,389 in July 2012 to £160,809 in July 2013.

With the typical equity put forward for remortgage applications having fallen by 16% over the same period, from £131,290 to £110,659, home owners are borrowing more relative to the value of their property than they were a year ago.

In fact existing homeowners appear to benefitted noticeably more than home buyers in terms of access to high LTV deals. The average LTV for remortgage applications rose by 3.9% to 60.6% in the 12 months to July 2013. In comparison, the typical purchase LTV dropped slightly by 0.2% to 70.2%.

‘One year down the line there can be no doubt the FLS has made great progress towards its goal of lowering mortgage pricing. It also seems this has been achieved without compromising affordability. Despite a surge of interest in the market, lenders are keeping a clear head and holding their position when assessing borrowers’ needs against their available finances,’ said Brian Murphy, head of lending at the Mortgage Advice Bureau.

‘The benefit of increased competition is that there is a better chance of finding a lender or product to suit more individuals. The avalanche of deals descending in the last year has left many people searching high and low to uncover the best deal,’ he explained.

He pointed out that it is no surprise that the latest Council of Mortgage Lender figures show greater numbers are turning to brokers for advice and guidance. ‘Even before the upcoming mortgage guarantees arrive on the shelf, credit availability is easing and there is no shortage of choice or funding in the market,’ he added.